My problem is when I have downloaded this south australia (SA - State of Australia), near the boundary of the state, I see there two polygons on top of each other fully overlapping. I reduced the fill opacity to 50% so where you see dark yellow colour those are overlapping polygons. It looks like some rectangle polygons on top of real suburb's outline. I dont know why it is like that ? And how can I get read of this.

Also I want to know how can merge (or dissolve) features (polygons) in same layer. Everytime I dissolve it create on new layer.

Do their attributes reliably differ? Is that Census Blocks? What are you after in the end.. ABS census blocks or localities? The square ones are SA_LOCAL_5 = H but the irregular are G, that can be used to separate them.
– Michael StimsonSep 21 '15 at 23:03

I think you should ask your last question separately (i.e. one question per question as per the Tour). I suspect that you are looking for what ArcInfo Workstation called DROPLINE functionality but in QGIS.
– PolyGeo♦Sep 21 '15 at 23:08

@PolyGeo - I am sorry for posting two questions in one post. But thanks for the answer. By any chance do you know what is equivalent functionality of DROPLINE functionality in QGIS
– microchip78Sep 21 '15 at 23:25

You'll see from that link that it was lost in the code translation to ArcGIS for Desktop (and I don't think I have checked ArcGIS Pro yet). I would be pleasantly surprised if it were in QGIS.
– PolyGeo♦Sep 21 '15 at 23:27

Something that will help here is a definition query or feature filter, here's a good post. so I wont repeat what was said before.

As you are new to GIS you probably need a bit of help to see how/when to use this powerful function. Firstly you need to find something that separates the features you want from the features you don't want (reliably), in this case the blocks have an attribute value of SA_LOCAL_5 = 'H' but the suburbs (the ones you want) have SA_LOCAL_5 = 'G':

This image is from ArcGis, QGIS is no different.

This does not modify the data but instructs the software (QGIS or ArcGis) to only use the features that match.